Part stand-up act and employee benefits seminar, Ouida Peterson's session on COBRA administration at EBN's 20th Annual Benefits Management Forum & Expo in Dallas was insightful and straightforward - all in a down-home type of way.

To some, the Texas native is a blend of Thelma Harper of the television sitcom "Mama's Family" with Molly Ivins, the late political journalist.

The vice president of education at CONEXIS, a Texas-based benefit consultancy firm, Peterson made her point clear: if straight talk gets employers to become more vigilant about keeping abreast of COBRA laws and producers, then so be it.

Administering COBRA "is simple if you know everything you need to know and when you need to know it," Peterson told attendees.

Things get tricky when it comes developing a timeline and knowing what information has to be shared. What's more, federal laws pertaining to COBRA keep changing and the person assigned to administer it is probably busy with other HR and benefits projects.

Peterson believes most employers are confused about COBRA and benefit offerings. For instance, they think workers can continue the same coverage they had as an active employee. "The COBRA law has never said that," she explained.

"It is not the same benefits they had as an active employee, but the same benefits that are available to active workers." If an employer decides to redesign it dental benefits for active workers, then the new offerings must also be available to COBRA participants. Nevertheless, COBRA costs for employers continue to rise, averaging $9,914 per participant per year in 2006, up from $5,721 in 2004, according to Spencer's Benefits Reports.

The average claims cost for COBRA users exceeded the average claim cost for active employees by 45% in 2005. The survey polled plan administrators representing 122 U.S. organizations with more than 441,000 employees. Among the companies that could compare COBRA costs and active employee costs, just 13% reported COBRA costs that were lower than active employee costs.

Meanwhile, Peterson contends employers sometimes don't gather all of the facts before addressing a COBRA inquiry. She told a story of a former worker who called the HR department and said, "My husband and I are on COBRA and we are getting a divorce."

She wanted to know whether her husband could continue without her. "It's a simple question, but the problem is that there are two or three different answers," Peterson said. Many HR folks will say the husband is eligible for 36 months, even though they don't have enough information about the situation, Peterson noted.

That answer is incorrect. "If the husband was not on the active coverage, and he was added to COBRA after it started, then he is not eligible for a second qualifying event. I get that question at least once a week," Peterson told the conference attendees. She is all too familiar with hearing stories about how a HR/benefits manager answered a COBRA question and the worker kept talking and made the HR rep change his or her mind.

"That's not the way it should work. The person doing the answering is supposed to gather all the information before they even try to utter an answer," she asserted. Anything the HR/benefits manager says before reviewing the worker's COBRA files is most likely inaccurate, and that's a compliance liability for the employer.

New guidelines

Almost everything changed in the COBRA world in 2004, especially with coverage election and general notice letters, Peterson says. "And here we are fixing to come upon 2008, and you still have employers using old letters." The new regulatory guidelines improved, in part, how an employee was required to notify an employer about a qualifying event, such as a divorce or a child who is no longer eligible for coverage as a dependent.

The proper procedure for notification, including the general notification letter, better protects employers by mitigating confusion about whether an employer was actually informed about the qualifying event. "Because many times it's not the employee that is notifying the employer, but an ex-spouse," she explains. Still, employers express concerns about affordability for their former workers.

About 74% of the companies had COBRA costs between 100% and 200% of active employee costs, and 13% had COBRA costs that were more than double the active employee costs, the Spencer study found. Some 10.1% of workers and dependents were eligible for COBRA coverage during the 2005 plan year, and 26.6% of them signed up for COBRA coverage, the survey indicates. Some of the others may have been able to find coverage through a spouse's plan or a parent's plan, rather than COBRA.

To learn more about COBRA and its notices, visit www.dol.gov/ebsa/consumer_info_health.html#cobra.